South Korean lawmakers have passed the first phase of a review of proposed regulations that would give the country's Financial Services Commission the power to investigate and monitor financial activities related to “digital assets,” including cryptocurrencies.
The proposed bill comes with numerous regulations governing the sale, storage and exchange of cryptocurrencies, with a particular emphasis on consumer protection and compliance reporting. Hwang Suk-jin, a member of the ruling People Power Party's Special Committee on Digital Assets, told media outlet Forkast that “both the ruling and opposition parties have agreed on the matter,” before saying the legislation would become law by the end of the year.
If passed, the bill would be one of the broadest pieces of national cryptocurrency legislation in existence. This would require exchanges and similar service providers to separate internal assets from user assets, insure and maintain reserves in the event of non-market-related losses. Central bank digital currencies and assets directly linked to the Bank of Korea were the only reported exceptions.
Businesses and individuals involved in South Korea's cryptocurrency economy will also be required to self-report breaches in order to maintain compliance.
The commission has proposed penalties that would impose relatively severe penalties should businesses or individuals run afoul of the proposed legislation. According to Forkast, the bill contains language indicating that those who lost less than approximately $3.75 mill ion in violations such as “failure to include required information in investor disclosures, price manipulation, and false promotion of crypto assets,” May face fines ranging from three to five times the total amount of damages, up to a year in prison.
Offenses that result in losses exceeding the $3.75 million mark established in the legislation carry penalties ranging from five years to life in prison. In comparison, the Titanium Blockchain CEO, who was recently convicted in the US for defrauding consumers of $21 million, was sentence to four years and three months in prison. The legislation was announced in June 2022, just a month after the collapse of the Terra ecosystem triggered a sharp decline in the cryptocurrency industry. Terraform Labs co-founder Shin Hyun-seong and nine others s were subsequently indicated by the South Korean government.
